The Blog

  • October 29, 2008
  • Strategy, forecasting and these times

    Last week NetSuite held a user group meeting in Boston for OpenAir, a company that they had bought earlier this year.  OpenAir, if you don’t know, provides an application for managing professional services engagements.  When integrated with NetSuite’s front and back office applications, the combination provides a lot of functionality for a professional services group.  I was invited to attend CEO Zach Nelson’s keynote in the afternoon but I found out later that there was another speech that I would have enjoyed as well.

    Former Harvard Business School professor, David Maister, gave a talk that was right down the middle of the plate for the professional services pros that peppered the audience.  Maister writes books and does high-powered consulting for a living these days and judging by the steady stream of books and engagements, I’d say he’s pretty good at it.

    Maister was there to talk about his latest book, a semi-autobiographical read with an unusual title: “Strategy and the Fat Smoker” which hooks you while the logical side of your brain digests the subtitle, “Doing what’s obvious but not easy”.  Boy, I thought to myself, this has CRM written all over it.  So, although I missed the talk I bought the book and I think my first impression was right.

    Maister’s premise is a simple one and he bluntly states it early on writing, “The necessary outcome of strategic planning is not analytical insight but resolve” (his italics).  Everybody who has ever been on a diet, tried to quit smoking, drinking or worse has come up against this truth.  We know it’s bad for us but we keep at it until we can’t anymore because changing is too hard and fraught with backsliding.

    Sound familiar?  It sounds to me like what happens in the upper end of the “S” curve.  If you’ve read Clayton Christensen’s books starting with “The Innovator’s Dilemma” you know that smart people who start and run successful companies often tend to stay too long at the same party.  Rather than re-innovating, they stay with the same old formula even as the market gives off plenty of signs that the old paradigm is no longer working.  While Christensen’s books give us great insight into what happens, Maister may be telling us why. 

    Perhaps this explains the value of disruptive innovation.  Innovation is hard and the people who do it are frequently, but not always, unaware of how hard it is and many have said that if they knew they might not have been so eager to begin.  Finally, it also explains why so many companies and the people who run them fail to re-innovate, it’s easier to stay with what you know works, or what once worked.

    The more I think about it the more I see it all playing out in CRM and specifically in SFA.  I have not written much lately about SFA because it was beginning to look rather mature with innovation happening around the margins with CRM 2.0.  Lately, however, I have also conducted some research into selling and the tools that sales people use.  I was surprised to learn from my study that more than half of the forecasts submitted by sales people are still delivered in spreadsheets.

    You might not think this is a big deal but to me it is.  In spite of all the investment in SFA, CRM and computing technology that companies have made over the last few decades, spreadsheets are still dominant.  In itself spreadsheet forecasting is not a big deal until you look at some other data from the same survey.  That data says that the majority of forecasts are so inaccurate you can’t use them.  For almost half (44%) you’d be better off using a dart board.  Only seven percent of sales people say that their forecasts are ninety percent accurate and ninety percent is something you can use.

    All this was percolating in my mind as I was doing some research on a small company, Right90, which specializes in forecasting, specifically business forecasting.  The sales forecast is a subset of the business forecast and if the sales forecast is inaccurate, other departments have a hard time, to say the least, in planning or informing the supply chain.

    So, this really focuses questions like: Why do we forecast this way? And can’t we find better ways to do this?

    It turns out that we can and we should but like Maister might say, doing what’s obvious might not be so easy.  In my research and discussions with Right90’s customers, I found that taking nothing away from their product, the biggest element of success turned out to be the resolve that successful managers bought to using the products.  In short, the successful managers said, we’re going in this direction, all of us, even other departments that depend on the forecast like production and the CEO is fully behind it.

    Contrary to popular myth, success in these situations is not an immediate triumph.  Instead it is the culmination of many baby steps.  Like a twelve step program to improve forecast accuracy, people were simply required (and assisted) to do better with this forecast than they did with the last.  Managers also helped by providing incentives for accuracy, not simply making the number.  Progress was slow at first, then it gained momentum and then there was a triumph.

    As we contemplate the impact of the financial meltdown and the prospects of a recession we see the outlines of a classic disruptive moment coming into view.  Past disruptive moments ushered in new paradigms and this will be no different.  The question for those present now is about whether or not we can and will adjust to changing circumstances.  Will we do what’s obvious but not easy?

     

    Published: 15 years ago


    Discussion

    • November 17th, 2008 at 1:51 pm    

      Timely piece. Have a look at Landslide too, they look good from the outside, would be interested in anyone elses take on it.

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